##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from      to
 Commission File Number: 000-25955
 Waste Services, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    01-0780204(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 1122 International Blvd., Suite 601, Burlington, Ontario, Canada L7L 6Z8  (Address of principal executive offices) (Zip Code)
 (905) 319-1237  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of March 31, 2010 (Unaudited) and December 31, 2009
    
    
    2Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009
    
    
    3Unaudited Condensed Consolidated Statement of Shareholders Equity for the Three Months Ended March 31, 2010
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 4. Controls and Procedures
    
    
    37PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    37Item 1A. Risk Factors
    
    
    37Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 3. Defaults Upon Senior Securities
    
    
    37Item 4. (Removed and Reserved)
    
    
    37Item 5. Other Information
    
    
    37Item 6. Exhibits
    
    
    37Signatures
    
    
    38EX-31.1EX-31.2EX-32.1
  1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 WASTE SERVICES, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share amounts)
 March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)ASSETSCurrent assets:Cash
    
    $
    5,793
    
    
    $
    3,699Accounts receivable (net of allowance for doubtful accounts of $432
and $511 as of March 31, 2010 and December 31, 2009, respectively)
    
    
    58,886
    
    
    
    60,808Prepaid expenses and other current assets
    
    
    14,683
    
    
    
    19,816Total current assets
    
    
    79,362
    
    
    
    84,323Property and equipment, net
    
    
    212,500
    
    
    
    204,505Landfill sites, net
    
    
    194,007
    
    
    
    196,342Goodwill and other intangible assets, net
    
    
    422,516
    
    
    
    419,439Other assets
    
    
    9,932
    
    
    
    10,383Total assets
    
    $
    918,317
    
    
    $
    914,992LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    22,392
    
    
    $
    31,039Accrued expenses and other current liabilities
    
    
    63,471
    
    
    
    63,807Short-term financing and current portion of long-term debt
    
    
    22,671
    
    
    
    20,059Total current liabilities
    
    
    108,534
    
    
    
    114,905Long-term debt
    
    
    376,663
    
    
    
    381,393Deferred income taxes
    
    
    41,842
    
    
    
    39,912Accrued closure, post-closure and other obligations
    
    
    20,915
    
    
    
    19,434Total liabilities
    
    
    547,954
    
    
    
    555,644Shareholders equity:Common stock $0.01 par value: 166,666,666 shares authorized, 46,778,957
and 46,253,107 shares issued and outstanding as of March 31, 2010 and December 31, 2009, respectively
    
    
    467
    
    
    
    462Additional paid-in capital
    
    
    504,318
    
    
    
    502,049Accumulated other comprehensive income
    
    
    51,146
    
    
    
    47,988Accumulated deficit
    
    
    (185,568
    )
    
    
    (191,151
    )Total shareholders equity
    
    
    370,363
    
    
    
    359,348Total liabilities and shareholders equity
    
    $
    918,317
    
    
    $
    914,992
  2




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WASTE SERVICES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 Three Months Ended March 31,2010
    
    
    2009Revenue
    
    $
    119,393
    
    
    $
    95,792Operating and other expenses:Cost of operations (exclusive of depreciation, depletion
and amortization)
    
    
    72,740
    
    
    
    63,208Selling, general and administrative expense (exclusive of
depreciation, depletion and amortization)
    
    
    17,258
    
    
    
    13,209Depreciation, depletion and amortization
    
    
    12,149
    
    
    
    10,360Gain on sale of property and equipment, foreign exchange
and other
    
    
    (33
    )
    
    
    (3,310
    )Income from operations
    
    
    17,279
    
    
    
    12,325Interest expense
    
    
    8,422
    
    
    
    7,498Change in fair value of warrants
    
    
    (177
    )
    
    
    (1,771
    )Income from operations before income taxes
    
    
    9,034
    
    
    
    6,598Income tax provision
    
    
    3,451
    
    
    
    2,588Net income
    
    $
    5,583
    
    
    $
    4,010Earnings per share  basic and diluted
    
    $
    0.12
    
    
    $
    0.09Weighted average common shares outstanding:Basic
    
    
    46,346
    
    
    
    46,110Diluted
    
    
    46,991
    
    
    
    46,136
  3




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WASTE SERVICES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
 For the Three Months Ended March 31, 2010
 (In thousands)
 AccumulatedWaste Services, Inc.
    
    
    Additional
    
    
    Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Income
    
    
    Deficit
    
    
    EquityBalance, December 31, 2009
    
    
    46,253
    
    
    $
    462
    
    
    $
    502,049
    
    
    $
    47,988
    
    
    $
    (191,151
    )
    
    $
    359,348Stock-based compensation
    
    
    435
    
    
    
    4
    
    
    
    1,509
    
    
    
    
    
    
    
    
    
    
    
    1,513Exercise of stock options and
warrants
    
    
    91
    
    
    
    1
    
    
    
    760
    
    
    
    
    
    
    
    
    
    
    
    761Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,158
    
    
    
    
    
    
    
    3,158Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,583
    
    
    
    5,583Balance, March 31, 2010
    
    
    46,779
    
    
    $
    467
    
    
    $
    504,318
    
    
    $
    51,146
    
    
    $
    (185,568
    )
    
    $
    370,363
  4




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WASTE SERVICES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Three Months Ended March 31,2010
    
    
    2009Cash flows from operating activities:Net income
    
    $
    5,583
    
    
    $
    4,010Adjustments to reconcile net income to net cash flows
from operating activities:Depreciation, depletion and amortization
    
    
    12,149
    
    
    
    10,360Amortization of debt issue costs and discounts
    
    
    982
    
    
    
    839Deferred income tax provision
    
    
    1,691
    
    
    
    1,578Non-cash stock-based compensation expense
    
    
    1,513
    
    
    
    1,155Change in fair value of warrants
    
    
    (177
    )
    
    
    (1,771
    )Loss (gain) on sale of property and equipment and other non-cash items
    
    
    152
    
    
    
    (3,363
    )Changes in operating assets and liabilities (excluding
the effects of acquisitions):Accounts receivable
    
    
    2,687
    
    
    
    3,745Prepaid expenses and other current assets
    
    
    5,455
    
    
    
    1,401Accounts payable
    
    
    (9,267
    )
    
    
    (3,181
    )Accrued expenses and other current liabilities
    
    
    446
    
    
    
    2,132Net cash provided by operating activities
    
    
    21,214
    
    
    
    16,905Cash flows from investing activities:Cash used in business combinations
    
    
    (7,009
    )
    
    
    (576
    )Capital expenditures
    
    
    (6,445
    )
    
    
    (6,944
    )Proceeds from asset sales and business divestitures
    
    
    281
    
    
    
    6,513Net cash used in investing activities
    
    
    (13,173
    )
    
    
    (1,007
    )Cash flows from financing activities:Draw on revolving credit facility
    
    
    17,333
    
    
    
    1,561Principal repayments of debt and capital lease
obligations
    
    
    (24,164
    )
    
    
    (13,317
    )Proceeds from the exercise of stock options and
warrants
    
    
    761
    
    
    
    Fees paid for financing transactions
    
    
    
    
    
    
    (62
    )Net cash used in financing activities
    
    
    (6,070
    )
    
    
    (11,818
    )Effect of exchange rate changes on cash
    
    
    123
    
    
    
    262Increase in cash
    
    
    2,094
    
    
    
    4,342Cash at the beginning of the period
    
    
    3,699
    
    
    
    7,227Cash at the end of the period
    
    $
    5,793
    
    
    $
    11,569
  5




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization of Business and Basis of Presentation
     6




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   2. Proposed Merger with IESI-BFC
    7




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 3. Recently Issued Accounting Pronouncements
    4. Fair Value Measurements
 1 2
 
    
    Level one  Quoted market prices in active markets for identical assets or liabilities;
    
    Level two  Inputs other than level one inputs that are either directly or indirectly
observable; and
    
    Level three  Unobservable inputs developed using estimates and assumptions, which are
developed by the reporting entity and reflect those assumptions that a market participant
would use.
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAccrued closure and post-closure obligations
    
    $
    
    
    
    $
    
    
    
    $
    20,060
    
    
    $
    20,060Accrued rent relative to the October 2008 restructuring
    
    
    
    
    
    
    
    
    
    
    534
    
    
    
    534Fair value of warrants
    
    
    
    
    
    
    2,652
    
    
    
    
    
    
    
    2,652Total
    
    $
    
    
    
    $
    2,652
    
    
    $
    20,594
    
    
    $
    23,246
 8




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  5. Share-Based Payments
     WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateNumber
    
    Grant
    
    Contractual
    
    Intrinsicof Shares
    
    Value
    
    Term (Years)
    
    ValueNonvested restricted stock units -Beginning of the period
    
    
    492,201
    
    
    $
    5.07
    
    
    
    0.2
    
    
    $
    4,484Granted
    
    
    435,341
    
    
    
    10.07Vested
    
    
    (435,322
    )
    
    
    4.55Forfeited
    
    
    
    
    
    
    End of the period
    
    
    492,220
    
    
    
    9.95
    
    
    
    
    
    
    
    4,868
  9




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Three MonthsEnded March31, 2009Annual dividend yield
    
    
    Weighted average expected life (years)
    
    
    7.0Risk-free interest rate
    
    
    2.6
    %Expected volatility
    
    
    52
    %
    WeightedNumber of Shares
    
    AverageIssuable
    
    Exercise PriceOptions outstanding at the beginning of the period
    
    
    1,119,483
    
    
    $
    8.59Granted
    
    
    
    
    
    
    Exercised
    
    
    (2,500
    )
    
    
    4.33Forfeited
    
    
    (3,500
    )
    
    
    4.33Expired
    
    
    
    
    
    
    Options outstanding at the end of the period
    
    
    1,113,483
    
    
    
    8.61Options vested or expected to vest at the end of the period
    
    
    1,054,280
    
    
    
    8.78Options exercisable at the end of the period
    
    
    885,434
    
    
    
    9.42
   Options
 10




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 RSUs
 6. Business Combinations
        VancouverCounty
    
    
    IslandRecycling
    
    
    Recycling
    
    
    TotalPurchase price
    
    $
    4,415
    
    
    $
    2,941
    
    
    $
    7,356Allocated as follows:Prepaid expenses and other current assets
    
    $
    
    
    
    $
    18
    
    
    $
    18Accrued expenses and other current liabilities
    
    
    (85
    )
    
    
    (208
    )
    
    
    (293
    )Property and equipment
    
    
    3,131
    
    
    
    3,039
    
    
    
    6,170Non-competition intangible assets
    
    
    33
    
    
    
    92
    
    
    
    125Fair value of assets acquired
    
    $
    3,079
    
    
    $
    2,941
    
    
    $
    6,020Goodwill allocation
    
    $
    1,336
    
    
    $
    
    
    
    $
    1,336
 11




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    Three Months Ended March 31,2010
    
    
    2009Revenue
    
    $
    120,048
    
    
    $
    104,352Net income
    
    $
    5,282
    
    
    $
    3,470Basic and diluted earnings per share
    
    $
    0.11
    
    
    $
    0.08Pro forma weighted average common shares outstanding:Basic
    
    
    46,346
    
    
    
    46,110Diluted
    
    
    46,991
    
    
    
    46,136
  7. Prepaid Expenses and Other Current Assets
  March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)Prepaid expenses
    
    $
    8,717
    
    
    $
    10,934Parts and supplies
    
    
    1,933
    
    
    
    1,896Other current assets
    
    
    4,033
    
    
    
    6,986$
    14,683
    
    
    $
    19,816
 12




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 8. Property and Equipment
  March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)Land and buildings
    
    $
    89,497
    
    
    $
    84,594Vehicles
    
    
    165,087
    
    
    
    159,788Containers, compactors and landfill and recycling equipment
    
    
    116,464
    
    
    
    108,932Furniture, fixtures, other office equipment and leasehold improvements
    
    
    13,677
    
    
    
    13,565Total property and equipment
    
    
    384,725
    
    
    
    366,879Less: Accumulated depreciation
    
    
    (172,225
    )
    
    
    (162,374
    )Property and equipment, net
    
    $
    212,500
    
    
    $
    204,505
  9. Landfill Sites, Accrued Closure, Post-Closure and Other Obligations
 Landfill Sites
  March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)Landfill sites
    
    $
    278,575
    
    
    $
    277,115Less: Accumulated depletion
    
    
    (84,568
    )
    
    
    (80,773
    )Landfill sites, net
    
    $
    194,007
    
    
    $
    196,342
  Three Months Ended March 31,2010
    
    
    2009Balance at the beginning of the period
    
    $
    196,342
    
    
    $
    196,632Landfill site construction costs
    
    
    777
    
    
    
    446Additional asset retirement obligations
    
    
    459
    
    
    
    316Depletion
    
    
    (2,505
    )
    
    
    (2,076
    )Reclassification to property and equipment
    
    
    (1,689
    )
    
    
    Effect of foreign exchange rate fluctuations
    
    
    623
    
    
    
    (495
    )Balance at the end of the period
    
    $
    194,007
    
    
    $
    194,823
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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Accrued Closure, Post-Closure and Other Obligations
  March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)Accrued closure and post-closure obligations
    
    $
    16,563
    
    
    $
    14,698Accrued restructuring and severance costs
    
    
    1,307
    
    
    
    1,596Other obligations
    
    
    3,045
    
    
    
    3,140$
    20,915
    
    
    $
    19,434
   Three Months Ended March 31,2010
    
    
    2009Current portion at the beginning of the period
    
    $
    4,834
    
    
    $
    7,589Long-term portion at the beginning of the period
    
    
    14,698
    
    
    
    12,749Balance at the beginning of the period
    
    
    19,532
    
    
    
    20,338Additional asset retirement obligations
    
    
    459
    
    
    
    316Accretion
    
    
    89
    
    
    
    158Payments
    
    
    (462
    )
    
    
    (578
    )Other additions
    
    
    118
    
    
    
    150Effect of foreign exchange rate fluctuations
    
    
    324
    
    
    
    (261
    )Balance at the end of the period
    
    
    20,060
    
    
    
    20,123Less: Current portion
    
    
    (3,497
    )
    
    
    (5,647
    )Long-term portion
    
    $
    16,563
    
    
    $
    14,476
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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 10. Goodwill and Other Intangible Assets
  March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)Other intangible assets subject to amortization:Customer relationships and contracts
    
    $
    58,925
    
    
    $
    58,899Non-competition agreements and other
    
    
    6,711
    
    
    
    6,60065,636
    
    
    
    65,499Less: Accumulated amortization:Customer relationships and contracts
    
    
    (32,907
    )
    
    
    (31,484
    )Non-competition agreements and other
    
    
    (3,791
    )
    
    
    (3,472
    )Other intangible assets subject to amortization, net
    
    
    28,938
    
    
    
    30,543Goodwill
    
    
    393,578
    
    
    
    388,896Goodwill and other intangible assets, net
    
    $
    422,516
    
    
    $
    419,439
  Three Months Ended March 31, 2010Florida
    
    
    Canada
    
    
    TotalBalance at the beginning of the period
    
    $
    292,121
    
    
    $
    96,775
    
    
    $
    388,896Acquisitions
    
    
    1,336
    
    
    
    
    
    
    
    1,336Effect of foreign exchange rate fluctuations
    
    
    
    
    
    
    3,346
    
    
    
    3,346Balance at the end of the period
    
    $
    293,457
    
    
    $
    100,121
    
    
    $
    393,578
 Three Months Ended March 31, 2009Florida
    
    
    Canada
    
    
    TotalBalance at the beginning of the period
    
    $
    263,428
    
    
    $
    83,501
    
    
    $
    346,929Acquisitions
    
    
    302
    
    
    
    
    
    
    
    302Effect of foreign exchange rate fluctuations
    
    
    
    
    
    
    (2,868
    )
    
    
    (2,868
    )Balance at the end of the period
    
    $
    263,730
    
    
    $
    80,633
    
    
    $
    344,363
  15




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  11. Other Assets
  March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)Debt issue costs, net of accumulated amortization of $5,664 and $5,062
as of March 31, 2010 and December 31, 2009, respectively
    
    $
    8,210
    
    
    $
    8,681Acquisition deposits
    
    
    1,193
    
    
    
    1,177Other assets
    
    
    529
    
    
    
    525$
    9,932
    
    
    $
    10,383
 12. Accrued Expenses and Other Current Liabilities
  March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)Deferred revenue
    
    $
    13,893
    
    
    $
    14,055Accrued interest
    
    
    9,645
    
    
    
    4,737Accrued compensation, benefits and subcontractor costs
    
    
    6,902
    
    
    
    9,849Insurance reserves
    
    
    5,948
    
    
    
    5,855Accrued waste disposal costs
    
    
    5,859
    
    
    
    5,358Accrued closure and post-closure obligations
    
    
    3,497
    
    
    
    4,834Accrued insurance premiums
    
    
    4,839
    
    
    
    6,559Fair value of warrants
    
    
    2,652
    
    
    
    2,829Accrued royalties and franchise fees
    
    
    2,226
    
    
    
    2,131Accrued restructuring and severance costs
    
    
    1,827
    
    
    
    2,009Accrued acquisition costs
    
    
    823
    
    
    
    260Accrued professional fees
    
    
    752
    
    
    
    894Accrued capital expenditures
    
    
    368
    
    
    
    969Current portion of capital lease obligations
    
    
    521
    
    
    
    570Other accrued expenses and current liabilities
    
    
    3,719
    
    
    
    2,898$
    63,471
    
    
    $
    63,807
 16




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  March 31,
    
    December 31,2010
    
    2009Annual dividend yield
    
    
    
    
    
    
    Expected life (years)
    
    
    0.1
    
    
    
    0.4Risk-free interest rate
    
    
    1.8
    %
    
    
    0.2
    %Expected volatility
    
    
    43
    %
    
    
    53
    %
  13. Debt
  March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)Credit Facilities:U.S. dollar denominated revolving credit facility, floating rate at 3.7%
as of March 31, 2010 and December 31, 2009
    
    $
    25,000
    
    
    $
    30,000Canadian dollar denominated revolving credit facility, floating rate at 4.8%
as of March 31, 2010 and December 31, 2009
    
    
    8,860
    
    
    
    5,709U.S. dollar denominated term loan facility, floating interest rate at 3.8% and 3.7%
as of March 31, 2010 and December 31, 2009, respecitvley, net of discount
of $817 and $904 as of March 31, 2010 and December 31, 2009, respectively
    
    
    35,084
    
    
    
    35,994Canadian dollar denominated term loan facility, floating interest rate at 4.0%
as of March 31, 2010 and December 31, 2009, net of discount of
$2,948 and $3,117 as of March 31, 2010 and December 31, 2009, respectively
    
    
    114,166
    
    
    
    113,228Senior Subordinated Notes, fixed interest rate at 9.5%, due 2014, net of discount
of $1,373 and $1,426 as of March 31, 2010 and December 31, 2009, respectively
    
    
    208,627
    
    
    
    208,574Other secured notes payable, interest at 4.5% to 7.8%, due through
2025 (net of discount of $966 and $1,075 as of March 31, 2010
and December 31, 2009, respectively)
    
    
    5,475
    
    
    
    5,769Other subordinated notes payable, interest at 6.7%, due through 2017
    
    
    2,122
    
    
    
    2,178399,334
    
    
    
    401,452Less: Current portion
    
    
    (22,671
    )
    
    
    (20,059
    )Long-term portion
    
    $
    376,663
    
    
    $
    381,393
 17




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Senior Secured Credit Facilities
   Other Secured Notes Payable
  Senior Subordinated Notes
 1 2
   18




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   14. Commitments and Contingencies
 Environmental Risks
   Legal Proceedings
   Surety Bonds, Letters of Credit and Insurance
  19




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Three Months Ended March 31,2010
    
    
    2009Balance at the beginning of the period
    
    $
    5,855
    
    
    $
    6,505Provisions
    
    
    571
    
    
    
    948Payments
    
    
    (830
    )
    
    
    (899
    )Unfavorable claim development for prior periods
    
    
    352
    
    
    
    411Balance at the end of the period
    
    $
    5,948
    
    
    $
    6,965
 Purchase Agreement
  Office Lease
 1 2
 Restructuring and Severance Related Commitments
  20




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Severanceand RelatedCosts
    
    
    Rent
    
    
    Consulting
    
    
    TotalBalance at December 31, 2009
    
    $
    1,492
    
    
    $
    574
    
    
    $
    562
    
    
    $
    2,628Changes in estimates and other provisions
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    17Payments
    
    
    (241
    )
    
    
    (57
    )
    
    
    (62
    )
    
    
    (360
    )Foreign exchange and other
    
    
    95
    
    
    
    
    
    
    
    
    
    
    
    95Balance at March 31, 2010
    
    $
    1,346
    
    
    $
    534
    
    
    $
    500
    
    
    $
    2,380
  Registration Payment Arrangement
  15. Authorized Capital Stock and Migration Transaction
 Total Shares
  
    
    166,666,666 shares of common stock, par value 0.01 per share; and
    
    5,000,000 shares of preferred stock, par value 0.01 per share, of which 100,000
shares have been designated as Series A Preferred Stock.
 21




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Preferred Stock
  Migration Transaction
     Warrants
  WeightedWeighted
    
    AverageNumber
    
    Average
    
    Remaining
    
    Aggregateof Shares
    
    Exercise
    
    Contractual
    
    IntrinsicIssuable
    
    Price
    
    Term (Years)
    
    ValueOutstanding at the beginning of the period
    
    
    2,804,695
    
    
    $
    8.88
    
    
    
    0.5
    
    
    $
    651Exercised during the period
    
    
    (88,028
    )
    
    
    8.52Outstanding at the end of the period
    
    
    2,716,667
    
    
    
    8.86
    
    
    
    0.3
    
    
    $
    2,789
 22




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  16. Comprehensive Income
  Three Months Ended March 31,2010
    
    
    2009Net income
    
    $
    5,583
    
    
    $
    4,010Foreign currency translation adjustment
    
    
    3,158
    
    
    
    (1,369
    )Comprehensive income
    
    $
    8,741
    
    
    $
    2,641
 17. Segment Information
    Three Months Ended March 31, 2010Florida
    
    Canada
    
    Corporate
    
    TotalRevenue
    
    $
    58,567
    
    
    $
    60,826
    
    
    $
    
    
    
    $
    119,393Depreciation, depletion and amortization
    
    
    6,485
    
    
    
    5,389
    
    
    
    275
    
    
    
    12,149Income (loss) from operations
    
    
    12,453
    
    
    
    13,199
    
    
    
    (8,373
    )
    
    
    17,279Capital expenditures
    
    
    2,711
    
    
    
    3,678
    
    
    
    56
    
    
    
    6,445
 Three Months Ended March 31, 2009Florida
    
    Canada
    
    Corporate
    
    TotalRevenue
    
    $
    50,243
    
    
    $
    45,549
    
    
    $
    
    
    
    $
    95,792Depreciation, depletion and amortization
    
    
    6,344
    
    
    
    3,778
    
    
    
    238
    
    
    
    10,360Income (loss) from operations
    
    
    11,366
    
    
    
    6,725
    
    
    
    (5,766
    )
    
    
    12,325Capital expenditures
    
    
    2,646
    
    
    
    4,187
    
    
    
    111
    
    
    
    6,944
  23




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
  Sources of Revenue
       24




---



##### Table of Contents



Expense Structure
       Recent Developments
 Proposed Merger with IESI-BFC
   25




---



##### Table of Contents



Acquisitions
       Goodwill
  26




---



##### Table of Contents



Results of Operations for the Three Months Ended March 31, 2010 and 2009
   As of:March 31, 2010
    
    $
    0.9844December 31, 2009
    
    
    0.9515For the three months ended:March 31, 2010
    
    
    0.9615March 31, 2009
    
    
    0.8035
 27




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##### Table of Contents



Three Months Ended March 31, 2010Florida
    
    
    
    
    
    
    Canada
    
    
    
    
    
    
    TotalRevenue
    
    $
    58,567
    
    
    
    100.0
    %
    
    $
    60,826
    
    
    
    100.0
    %
    
    $
    119,393
    
    
    
    100.0
    %Operating expenses:Cost of operations
    
    
    34,952
    
    
    
    59.7
    %
    
    
    37,788
    
    
    
    62.1
    %
    
    
    72,740
    
    
    
    60.9
    %Selling, general and administrative expense
    
    
    9,083
    
    
    
    15.5
    %
    
    
    8,175
    
    
    
    13.4
    %
    
    
    17,258
    
    
    
    14.5
    %Depreciation, depletion and amortization
    
    
    6,510
    
    
    
    11.1
    %
    
    
    5,639
    
    
    
    9.3
    %
    
    
    12,149
    
    
    
    10.2
    %Loss (gain) on sale of property and equipment,
foreign exchange and other
    
    
    25
    
    
    
    0.0
    %
    
    
    (58
    )
    
    
    -0.1
    %
    
    
    (33
    )
    
    
    -0.1
    %Income from operations
    
    $
    7,997
    
    
    
    13.7
    %
    
    $
    9,282
    
    
    
    15.3
    %
    
    $
    17,279
    
    
    
    14.5
    %Three Months Ended March 31, 2009Florida
    
    
    
    
    
    
    Canada
    
    
    
    
    
    
    TotalRevenue
    
    $
    50,243
    
    
    
    100.0
    %
    
    $
    45,549
    
    
    
    100.0
    %
    
    $
    95,792
    
    
    
    100.0
    %Operating expenses:Cost of operations
    
    
    31,975
    
    
    
    63.6
    %
    
    
    31,233
    
    
    
    68.6
    %
    
    
    63,208
    
    
    
    66.0
    %Selling, general and administrative expense
    
    
    6,446
    
    
    
    12.8
    %
    
    
    6,763
    
    
    
    14.8
    %
    
    
    13,209
    
    
    
    13.8
    %Depreciation, depletion and amortization
    
    
    6,364
    
    
    
    12.7
    %
    
    
    3,996
    
    
    
    8.8
    %
    
    
    10,360
    
    
    
    10.8
    %Loss (gain) on sale of property and equipment,
foreign exchange and other
    
    
    (3,474
    )
    
    
    -6.9
    %
    
    
    164
    
    
    
    0.4
    %
    
    
    (3,310
    )
    
    
    -3.5
    %Income from operations
    
    $
    8,932
    
    
    
    17.8
    %
    
    $
    3,393
    
    
    
    7.4
    %
    
    $
    12,325
    
    
    
    12.9
    %
 Revenue
  Three Months Ended March 31,2010
    
    
    2009Collection
    
    $
    96,843
    
    
    
    71.8
    %
    
    $
    82,261
    
    
    
    77.2
    %Landfill disposal
    
    
    15,171
    
    
    
    11.3
    %
    
    
    9,574
    
    
    
    9.0
    %Transfer station
    
    
    17,799
    
    
    
    13.2
    %
    
    
    12,974
    
    
    
    12.2
    %Material recovery facilities
    
    
    4,767
    
    
    
    3.5
    %
    
    
    1,572
    
    
    
    1.5
    %Other specialized services
    
    
    214
    
    
    
    0.2
    %
    
    
    201
    
    
    
    0.1
    %134,794
    
    
    
    100.0
    %
    
    
    106,582
    
    
    
    100.0
    %Intercompany elimination
    
    
    (15,401
    )
    
    
    
    
    
    
    (10,790
    )$
    119,393
    
    
    
    
    
    
    $
    95,792
  28




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##### Table of Contents



Cost of Operations
    Selling, General and Administrative Expense
  Depreciation, Depletion and Amortization
  Gain on Sale of Property and Equipment, Foreign Exchange and Other
  29




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##### Table of Contents



Interest Expense
  Three Months Ended March 31,2010
    
    
    2009Senior Secured Credit Facilities
    
    $
    1,891
    
    
    $
    2,259Senior Subordinated Notes
    
    
    4,988
    
    
    
    3,800Amortization of debt issue costs and discounts
    
    
    982
    
    
    
    839Other interest expense
    
    
    561
    
    
    
    600$
    8,422
    
    
    $
    7,498
  Change in Fair Value of Warrants
  Income Tax Provision
   30




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##### Table of Contents



Liquidity and Capital Resources
  Senior Secured Credit Facilities
   Maximum
    
    Maximum
    
    MinimumConsolidated
    
    Consolidated
    
    ConsolidatedLeverage
    
    Senior Secured
    
    InterestRatio
    
    Leverage Ratio
    
    Coverage RatioFirst quarter - 2010
    
    
    4.25 : 1.00
    
    
    
    2.75 : 1.00
    
    
    
    2.75 : 1.00Second quarter - 2010
    
    
    4.25 : 1.00
    
    
    
    2.75 : 1.00
    
    
    
    2.75 : 1.00Third quarter - 2010
    
    
    4.00 : 1.00
    
    
    
    2.75 : 1.00
    
    
    
    2.75 : 1.00Fourth quarter - 2010
    
    
    4.00 : 1.00
    
    
    
    2.75 : 1.00
    
    
    
    2.75 : 1.00First quarter - 2011
    
    
    4.00 : 1.00
    
    
    
    2.75 : 1.00
    
    
    
    2.75 : 1.00
 31




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##### Table of Contents



Other Secured Notes Payable
  Senior Subordinated Notes
 1 2
     Surety Bonds, Letters of Credit and Insurance
  32




---



##### Table of Contents



Cash Flows
  Cash Flows from Operating Activities
  Cash Flows from Investing Activities
  Cash Flows from Financing Activities
  Off-Balance Sheet Financing
  33




---



##### Table of Contents



Landfill Sites
  March 31, 2010Balance,
    
    
    Changes in
    
    
    
    
    
    
    Balance,Beginning
    
    
    Engineering
    
    
    Airspace
    
    
    Endof Period
    
    
    Estimates
    
    
    Consumed
    
    
    of PeriodUnited StatesPermitted capacity
    
    
    77,821
    
    
    
    (167
    )
    
    
    (527
    )
    
    
    77,127Probable expansion capacity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total available airspace
    
    
    77,821
    
    
    
    (167
    )
    
    
    (527
    )
    
    
    77,127Number of sites
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4CanadaPermitted capacity
    
    
    15,406
    
    
    
    
    
    
    
    (226
    )
    
    
    15,180Probable expansion capacity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total available airspace
    
    
    15,406
    
    
    
    
    
    
    
    (226
    )
    
    
    15,180Number of sites
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3TotalPermitted capacity
    
    
    93,227
    
    
    
    (167
    )
    
    
    (753
    )
    
    
    92,307Probable expansion capacity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total available airspace
    
    
    93,227
    
    
    
    (167
    )
    
    
    (753
    )
    
    
    92,307Number of sites
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7
 Trend Information
 Seasonality
  
    
    Less solid waste is generated during the late fall, winter and early spring because of
decreased construction and demolition activity.
    
    Certain operating costs are higher in the winter months because winter weather conditions
slow waste collection activities, resulting in higher labor costs, and rain and snow
increase the weight of collected waste, resulting in higher disposal costs, which are
calculated on a per ton basis.
    
    During the summer months, there are more tourists and part-time residents in some of our
service areas, resulting in more residential and commercial collection.
  34




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##### Table of Contents



New Accounting Pronouncements
    Disclosure Regarding Forward-Looking Statements and Factors Affecting Future Results
   
    
    effect on our business resulting from uncertainties surrounding the proposed merger with
IESI-BFC Ltd. and costs associated with the proposed merger;
    
    our substantial indebtedness and the significant restrictive covenants in our various
credit facilities and our ability to finance acquisitions and / or capital expenditures with
cash on hand, debt or equity offerings;
    
    our ability to pay principal debt amounts due at maturity;
    
    our business is capital intensive and may consume cash in excess of cash flow from
operations and borrowings;
    
    our ability to vertically integrate our operations;
    
    our ability to maintain and perform our financial assurance obligations;
    
    changes in regulations affecting our business and costs of compliance;
 35




---



##### Table of Contents




    
    revocation of existing permits and licenses or the refusal to renew or grant new permits
and licenses, which are required to enable us to operate our business or implement our
growth strategy;
    
    our domestic operations are concentrated in Florida, which may be subject to specific
economic conditions that vary from those nationally as well as weather related events that
may impact our operations;
    
    construction, equipment delivery or permitting delays for our transfer stations or
landfills;
    
    our ability to successfully implement our corporate strategy and integrate any
acquisitions we undertake;
    
    our ability to negotiate renewals of existing service agreements at favorable rates;
    
    our ability to enhance profitability of certain aspects of our operations in markets
where we are not internalized through either divestiture or asset swaps;
    
    costs and risks associated with litigation; and
    
    changes in general business and economic conditions, commodity pricing, exchange rates,
the financial markets and accounting standards or pronouncements.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
    36




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##### Table of Contents



Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Controls Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. ( Removed and Reserved)
 
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibit 31.1
    
    Section 302 Certification of David Sutherland-Yoest, Chief Executive Officer.Exhibit 31.2
    
    Section 302 Certification of Edwin D. Johnson, Chief Financial Officer.Exhibit 32.1
    
    Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer.
 37




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##### Table of Contents



SIGNATURES
  WASTE SERVICES, INC.Date: April 27, 2010By:
    /s/ DAVID SUTHERLAND-YOESTDavid Sutherland-YoestPresident and Chief Executive OfficerBy:
    /s/ EDWIN D. JOHNSONEdwin D. JohnsonExecutive Vice President, Chief Financial Officer 38




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No
    
    DescriptionExhibit 31.1
    
    Section 302 Certification of David Sutherland-Yoest, Chief Executive Officer.Exhibit 31.2
    
    Section 302 Certification of Edwin D. Johnson, Chief Financial Officer.Exhibit 32.1
    
    Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer.
 39